Few people would mourn the endof $35 million annual compensation packages for insuranceexecutives  — though they might miss hospitals' valetparking and private rooms. (Photo: Shutterstock)

|

As calls for radical health reform grow louder, many on theright, in the center and in the health care industry are arguingthat proposals like “Medicare for All” would cause economic ruin,decimating a sector that represents nearly 20 percent ofour economy.

|

While exploring a presidential run, former Starbucks chiefHoward Schultz called Medicare for All “not American,”adding, “What industry are we going to abolish next — the coffeeindustry?” He said thatit would “wipe out the insurance industry.”

|

A fellow at the libertarian Cato Institute wrote that it would“carpetbomb the industry.” David Wichmann, the chiefexecutive of UnitedHealth Group, warnedthat it “would surely have a severe impact on theeconomy and jobs.”

|

Related: CBO: Medicare for All a 'majorundertaking'

|

It's true: Any significant reform would require majorrealignment of the health care sector, which is now the biggestemployer in at least a dozen states. Most hospitals and specialistswould probably lose money. Some, like the middlemen who negotiatedrug prices, could be eliminated. That would mean job losses in themillions.

|

Though it will be economically painful, the point is tostreamline for patients a Kafka-esque health care system that makesmoney for industry through irrational practices. After all,shouldn't the primary goal of a health care system be deliveringefficient care at a reasonable price, not rewarding shareholders orbuttressing the economy?

|

In 2012, Harvard economists Katherine Baicker and AmitabhChandra warned against“treating the health care system like a (wildly inefficient) jobsprogram.” They were rightly worried that the health care system wasthe primary engine of recovery from the Great Recession. And yetthe revelation that the healthcare sector added more jobs last year than anyother in the economy was greeted by many as goodnews.

|

It's not surprising that those involved in the business ofmedicine have joined forces in a lobbying and mediacampaign, the Partnership forAmerica's Health Care Future, to ward off transformationalreform, particularly Medicare for All. But fed-up voters seem readyto upend an industry that saps their finances, wastes their timeand doesn't deliver particularly good care. Few people would mournthe end of $35 million annual compensation packages for insuranceexecutives or the downsizing of companies thathave raisedinsulin prices to 10 times what they are in Canada —though they might miss hospitals' valet parking and privaterooms.

|

Well over half of Americans already say they have a favorableview of Medicare for All. Though approval falls off when confrontedwith details such as higher taxes, it is clear that the electorateis searching for something big. Change could come in many guises:for example, some form of Medicare expansion, governmentnegotiations on drug prices or enhancing the power of theAffordable Care Act. The more fundamental the reform, the moresevere the economic effect.

|

The first casualties of a Medicare for All plan, said Dr. KevinSchulman, a physician-economist at Stanford, would be the“intermediaries that add to cost, not quality.” For example, thearmies of administrators, coders, billers and claims negotiatorswho make good middle-class salaries and have often spent years inschool learning these skills. There would be far less need for drugand device sales representatives who ply their trade office tooffice and hospital to hospital in a single-payer system, or one inwhich prices are set at a national level.

|

Some geographic areas would be hit particularly hard. A singlehospital system is by far the biggest employer in manypost-manufacturing cities like Pittsburgh andCleveland. Hospitals and hospital corporations make upthe topsix employers in Boston and twoof the top three in Nashville. Hartford is known as theinsurance capital of the world. Where would New Jersey be ifdrugmakers took a big hit, or Minnesota if device makers vastlyshrank their workforce? (That may be why some Democraticrepresentatives and senators from these left-leaning states havebeen quiet or inconsistent on Medicare expansion.)

|

Stanford researchers estimate that 5,000 community hospitalswould lose more than $151 billion under a Medicare for All plan;that would translate into the loss of 860,000 to 1.5 million jobs.A Navigant study found that a typical midsize, nonprofit hospital systemwould have a net revenue loss of 22 percent.

|

Robert Pollin, an economist at the Political Economy ResearchInstitute of the University of Massachusetts-Amherst, is frustratednot just by the doomsday predictions but also by how proponents ofMedicare for All tend to gloss over the jobs issue.

|

“Every proponent of Medicare for All — including myself — has torecognize that the biggest source of cost-saving is layoffs,” hesaid. He has calculated that Medicare for All would result in joblosses (mostly among administrators) “somewhere in the range of 2million” — about half on the insurers' side and half employed inhospitals and doctors' offices to argue with the former. Supportersof Medicare for All, he said, have to think about a “justtransition” and “what it might look like.”

|

Of course, if more people get health insurance under an expandedMedicare, there will be a greater need for some workers — likenurse practitioners and physician assistants. And there is a largeunmet labor need in caring for an aging population. The latter aremostly low-wage jobs, however, and neither compensates for thelosses.

|

Pollin suggests that a transition to Medicare for All should beaccompanied by a plan to give those made redundant up to threeyears of salary and help in retraining for another profession.

|

Despite the short-term suffering caused by any fundamental shiftin our health care delivery system, reform would ultimatelyredirect resources in ways that are good for the economy, manyexperts say.

|

“I'm sympathetic to the impact that changes will have onspecific markets and employment — we can measure that,” Schulmansaid. “What we can't quantify is the effect that high health carecosts have had on non-health care industries.”

|

The expense of paying for employees' health care has depressedwages and entrepreneurship, he said. He described a textilemanufacturer that moved more than 1,000 jobs out of the countrybecause it couldn't afford to pay for insurance for its workers.Such decisions have become common in recent years.

|

“Yes, these are painful transitions,” said Baicker, who is nowthe dean of the University of Chicago's Harris School of PublicPolicy. “But the answer is not to freeze the sectors where we arefor all time. When agriculture improved and became more productive,no one said everyone had to stay farmers.”

|

Kaiser Health News isa nonprofit news service covering health issues. It is aneditorially independent program of the Kaiser Family Foundation,which is not affiliated with Kaiser Permanente.

|

Read more: 

 

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.